Friday, October 21, 2016

PayPal & Boston Beer Earnings

Today PayPal(PYPL) reported Q3 results with EPS up 8% to $0.27 on revenues up 18% to $2.6 billion. The company increased it's active users to 192 million and TPV was up 25% to $87 billion. The company increased mobile payments by 56%(29% of TPV), and it's Venmo increased TPV by 131% to $4.9 billion. This is another solid quarter of growth for the company. I think the company will beat it's full year EPS guidance of $1.13-$1.15. My guess is it will actually come in at $1.17-$1.18. The company also upped it's 3 year revenue growth projections to 16-17% from 15%. One of the few discouraging signs are it's 5 quarter slide in transaction margins to 58.7%, down from 62.3% last year. The shares are up nicely today with a 9% gain. Here is what the CEO had to say.

“We are pleased to have delivered another quarter of strong results. The opportunities for PayPal to grow and gain share have never been greater. We are executing against our strategic plan with intensity and speed, and we are committed to seizing the opportunities in front of us by truly embracing the mantle of “Customer Champion.” We are further expanding the ubiquity and value of the PayPal brand and moving deliberately towards achieving our vision of becoming an everyday, essential financial service for people around the world,” said Dan Schulman, President and CEO of PayPal.

Boston Beer(SAM) also reported it's Q3 results today with EPS of $2.48 on revenues of $253.4 million(down 14%). The company also narrowed it's 2016 guidance to $6.40-$6.70 from $6.30-$7.00.  Although the depletion trend slowed a bit, it appears inventory levels are getting to a reasonable point.  I'm not overly excited about the guidance, but I think this marks the low point for the company. The company still anticipates to spend $781 million on buybacks, and reducing share count.  I think that will provide more of a catalyst to EPS growth too. The shares are up 4% right now, and have traded higher all day. That should also be a nice boost to the portfolio considering SAM's weight in it.   Here is what management had to say.

Jim Koch, Chairman and Founder of the Company, commented, "Our total company depletion trends declined in the third quarter at a slightly faster rate as we lapped new beer launches from last year, and we saw a further slowdown in growth across the Craft brewing industry. I am energized by our team's plans to return Samuel Adams to growth, that include investments in new packaging, new beers, a fifth seasonal and enhanced drinker communication. We continue to believe that we are well positioned to meet the challenges of this competitive environment, because of the quality of our employees, our beers, our innovation capability and our sales execution strength. Our strong financial position enables us to invest in growing our brands and creating new growth opportunities. A major packaging update for Samuel Adams Boston Lager has already shipped, to be followed by new Seasonal and Rebel packaging by the end of the fourth quarter, and we also expect to complete the national draft launch of Samuel Adams Rebel Juiced, a tropical IPA featuring citrusy hops in late October. In the early part of 2017, we are reimagining our seasonal program by adding two new beers; Samuel Adams Hopscape, a 30 IBU wheat ale with four types of West Coast hops for January and February 2017, and Samuel Adams Fresh as Helles, a helles lager with orange blossom petals for February and March 2017. We remain confident about the long-term outlook for the craft category and our Samuel Adams brand."

Martin Roper, the Company's President and CEO stated, "Our third quarter depletions volume continued to be below our expectations, primarily due to decreases in our Samuel Adams, Angry Orchard, Coney Island and Traveler brands that were only partially offset by increases in our Twisted Tea and Truly Spiked & Sparkling brands. The comparative decline in the third quarter of 2016 for shipments and depletions was significantly impacted by the third quarter 2015 national launch of Coney Island Hard Root Beer and the loss of share due to new entrants in hard soda since the launch. We are happy with our Truly Spiked & Sparkling category leadership position, and are investing to grow this emerging category. However, we were disappointed during the quarter by cider category trends, and believe we have opportunities to increase visibility and disruption at retail for our cider packages. We have adjusted our expectations for 2016 full-year depletions growth and our earnings guidance to reflect our trends for the first nine months and our current view of the remainder of the year. We remain prepared to forsake short term earnings, as we invest to return to long-term profitable growth, commensurate with the opportunities and the increased competition that we see. We have provided our preliminary view of 2017 growth rates but these rates are difficult to predict and subject to reassessment, as current industry trends suggest slowing of category growth rates and the impact of increased competition, new introductions and retailer programing are all unclear. Long term, we remain optimistic for future craft and cider category growth."

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